Bogota acknowledges errors in contract dispute

BOGOTA — The borough has admitted it erred when it declared a developer in breach of contract and agreed to bar its engineer from a construction site — potentially ending its bitter legal battle with the developer of a multimillion-dollar apartment complex.

Under the terms of a settlement agreement obtained by The Record, Bogota agrees it declared "without basis" 297 Palisades Urban Renewal Co. LLC in default of its redevelopment agreement for failing to produce construction permits, financing and insurance documents required for the project.

The company is constructing 44 one- and two-bedroom apartments on Palisade Avenue. The accord — brokered by attorneys for Bogota and the developer, who has sued the borough more than twice in Superior Court — also forbids Robert Costa of Costa Engineering Corp. from conducting inspections on the project.

Mayor Tito Jackson and other council members alleged in public council meetings that Costa performed unauthorized inspections at the Palisade Avenue construction site and then billed the borough $28,000 for his work — money that would be paid out of an escrow account funded by the developer. Costa has denied performing work outside of the scope of the redevelopment agreement. He maintained that the inspections were part of his job duties. However, those inspections partly contributed to the default letter that the developer has disputed.

Costa was retained by the majority members of the council who are at odds with the mayor.

Borough Administrator August "Chip" Greiner said the borough is now searching for an engineer tasked only with overseeing the project.

The Borough Council unanimously approved the settlement agreement at its Aug. 12 meeting. In reaching the settlement, Bogota and 297 Palisades agreed to drop most lawsuits and counterclaims against the other. Both parties also agreed to forward future disputes of the redevelopment contract to retired Superior Court Judge Alexander Carver III, who is serving as the mediator, according to the settlement papers. The loser of any dispute pays the mediator's fees.

"It basically resets everything to Jan. 1," before Bogota and 297 Palisades had a falling out over a development contract, Greiner said this week.

Legal bills for the dispute with 297 Palisades have mounted: more than $99,000 from March to June and at least a few thousand more for July and August, Greiner said in an email.

"Nothing was accomplished by a default [letter] that should never have been issued in the first place," Greiner wrote in the email.

Justin Santagata, the attorney for 297 Palisades, said his client is "pleased with the settlement acknowledging that the redeveloper was never in default on the redevelopment."

"The redeveloper now looks forward to working with all members of the governing body," he added.

Furthermore, according to the terms, Bogota must give the developer a monthly statement on the project's escrow account, used to pay engineers' and construction-related fees. The borough must also withdraw insurance claims made to the 297 Palisades' insurance agent to indemnify itself from the developer's lawsuits, an action the redevelopment contract allows for third parties and not Bogota or the developer.

"Since the settlement agreement there hasn't been one conflict or disagreement," Greiner said. "I don't get 20 emails per day from attorneys fighting each other. Things seem to be moving along fine."

Tax break's pros, cons

Under the redevelopment agreement — granted by a majority of the previous council in September — 297 Palisades can build 37 two-bedroom units and seven one-bedroom units, with 87 on-site parking spaces in a two-level garage. Over the 30-year agreement, the borough will receive $3.4 million in revenue, far less than the $7.8 million it would receive if there is no tax break. However, the tax break allows the municipal government to keep most of the tax revenue without sharing it with the schools and county.

Council President Jorge Nunez, a vocal critic of the developer's tax break, last year vowed an investigation into how the contract was negotiated and claimed the agreement would eventually cost taxpayers, although some experts have called that claim misleading.

In response, the developer requested emails Nunez transmitted, including correspondence to The Record, discussing the developer and its project on Palisade Avenue. Nunez told the borough clerk there were no emails on his council account that satisfied the developer's request. However, there were emails on his personal account. As a result, the developer sued and won a complaint alleging Nunez's apparent violation of the Open Public Records Act in March.

However, the victory did not end the ordeal, and the developer brought a second OPRA lawsuit to compel the additional records. In the settlement, 297 Palisades also agreed to drop that second lawsuit and complaints against Nunez, which he says is the "driving force" behind the settlement.

"It is what it is," Nunez said on Tuesday. But the council leader still has questions about the tax break.

"I just don't think that anyone was at the table advocating for the taxpayers of the town," he said. "At this point, we've just got to hope that the developer puts up a successful project and that everybody gets to move on."